Jim Clark: Discussing Nevada’s business margins tax

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The proposed business margins tax will be decided by Nevada voters this November (ballot question #3). The measure would assess a tax against gross revenues (not net revenues) of Nevada businesses with annual cash flows exceeding $1 million. All proceeds would be sequestered into Nevada’s distributive school account and doled out to the Silver State’s 17 county school districts.

Proponents (primarily the Nevada State Education Association) and opponents (primarily business trade organizations, Governor Sandoval, virtually all Republicans and most Democrats) have raised large sums of money to advance their arguments to the public this fall. Proponents pretty much echo a single theme: “Nevada’s schools are among the worst in the nation so spend more money on them!”

Opponents advance several arguments. Senator Dean Heller (R – NV) recently announced the proposed tax would equate to a Nevada corporate income tax of 15 percent. Opponents further argue that it would cost Nevada jobs; that it would hurt even businesses with revenues under $1 million because it would increase their costs of raw materials and occupancy; that the measure’s confusing language would spawn multiple law suits, that it would require establishing a “Nevada IRS”, that legislature could divert large sums presently allocated to education to other needs such as Medicaid, mental health, highways, etc. All these arguments and counter-arguments will be blaring from our TVs and radios this fall as the election approaches.

But it seems to me that there’s a more fundamental question. Will increased spending improve education? Each side can cite “studies” that support its contentions, but they were generally conducted by entities with agendas. Not so a March, 2014 study by the Cato Institute in Washington, D.C. It noted that although state education spending records going back 40 years are available, uniform state records of student achievement tests have only recently come into existence with the No Child Left behind Act.

Cato therefore looked at college student aptitude test (“SAT”) score records on a state by state basis from 1972 to 2012, adjusting the scores for student participation and demographics. The SAT measures reading comprehension, mathematical skills and vocabulary, pretty much what K-12 education is supposed to impart in students. The institute then looked at each state’s education spending history between 1972 and 2012 and compared the inflation adjusted budget figures with SAT performance.

Nationally education spending increased by over 110 percent during the period of study while SAT results flat lined, actually declining 3 percent as of 2012. Spending declined about 40 percent between 1988 and 1993, resuming its rise back to 110 percent thereafter through 2008 when the recession hit and spending declined 20 percent. Nevada’s results were similar to all the other states. The nationwide correlation between education spending and academic performance was found to be 0.075 percent. Cato said: “The 0.075 figure reported here suggests that there is essentially no link between state education spending (which has exploded) and the performance of students at the end of high school (which has generally stagnated or declined).” The analysis continued: “Not only have dramatic spending increases been unaccompanied by improvements in performance the same is true of the occasional spending declines experienced by some states. At one time or another over the past four decades Alaska, California, Florida, (Nevada) and New York all experienced multi-year periods over which real spending fell substantially (20 percent or more of their 1972 expenditure levels). And yet none … experienced noticeable declines in SAT scores …”

The teacher union is selling us snake oil. When they say: “do it for the kids” they mean “do it so we can have more dues-paying members.” Unless the system is changed, throwing money at bureaucrats is not going to help our kids.

Jim Clark is Republican Advocates president and has served on Washoe County, Nevada State GOP Central Committees. Email tahoesbjc@aol.com.